8 valuable tips for investing successfully in buy-to-let properties


If you’re looking to capitalise on historically low interest rates and rocketing demand for housing, buy-to-let remains a viable option. That’s especially the case for those who can raise a large enough deposit.

However, though there is money to be made, interest rates won’t stay low forever. So here are some crucial things to keep in mind if you want to stay on the right side of the ledger. And make sure you remember that any property used as security, which may include your home, may be repossessed if you don’t keep up repayments on your mortgage.

Tip 1. Choose your region carefully

As we’ve seen from the countless headlines trumpeting London’s housing shortage, there’s a great disparity in prices and demand across the country. London and its outlying areas continue to grow in strength – but the same can’t be said for other parts of the UK. So don’t assume that the bubbly news about London’s housing prices will hold true for the Midlands. It probably won’t. Research the region you’re targeting carefully, and save yourself buying into a world of pain.

Tip 2. Know the neighbourhood

The timeless adage holds true: invest in what you know. So get to know the areas you’re considering. After all, a matter of a few streets can be the difference between a charming neighbourhood on the rise and one being left for dead. Check out the area during different times of the day and week to get a genuine sense for the place, people and type of community you’re investing in – because that’s what your prospective customers will be doing. What’s more, do your homework about planned developments nearby. Even regions that aren’t performing well will have neighbourhoods that are sound investments. The reverse is true as well. Do your due diligence and know where you’re buying.

Tip 3. Look for ways to add value

Whether you’re contemplating a London bungalow or a 2-bedroom in Bournemouth, the best way to realise an immediate return is to look for a property that you can add value to straight away. Whether it’s a minor refurbishment, or tearing down a wall to convert a useless utility room into a more spacious lounge, a bit of upfront effort can instantly improve a property and attract a better price.

Tip 4. Know your target market

Remember that when it comes to buy-to-let, you’re not the final customer. So instead of shopping and refurbishing to your taste, establish who your target customer really is. After all, your fondness for open plan living may be irrelevant to new parents in need of a baby room.

Tip 5. Play to your strength

Like first-time buyers, you have the advantage of not being under time-pressure to complete a purchase – which may not be the case for your seller if he’s already purchased his next property and is counting on the funds. So use that edge by haggling for a better price, confident that you can always park your money somewhere secure until the right deal comes along.

Tip 6. Do your maths

Sit down with pen and paper and figure out your finances. What mortgage can you afford? What are the added fees? What happens if your place goes unrented for 2 or 3 months? What will it cost to insure? Lenders will typically expect your rent to cover 125% of the mortgage repayments, with many of them demanding 25% deposits or more. So factor all that into the type of property you’re looking to purchase.

Tip 7. Shop around for the best mortgage

It’s obvious but often overlooked. Do your homework by shopping for the best mortgage rate and terms. These days, most trusted lenders have a wide range of options. A quick glimpse at Barclays’ buy-to-let mortgage rates underlines the breadth of options from fixed and tracker mortgages and beyond. It will take diligence, but the effort could save you tens of thousands of pounds over the years. Of course, you do need to remember that any property used as security, including your home, could be repossessed if you don’t keep up repayments on your mortgage. So be sure you fully understand what you’re committing to and do your homework carefully.

Tip 8. Consider how much work you’re prepared to do

Last but not least, honestly assess how hands-on you want to be with the property. If you’re willing to manage it yourself you’ll save considerably in management fees. But be prepared to put in the time — from the initial rental to regular maintenance to travelling to and fro. Conversely, a property management company will absolve you of that effort — along with about 10–15% of the rent in management fees. Depending on your budget, that could eat into your profit.

3 Responses to 8 valuable tips for investing successfully in buy-to-let properties

  1. I think many first time buyers fail to realistically consider how much time they want to invest in the property. They often get lofty goals of how they might add value, but when it comes down to it, they don’t have the time needed to do it right.

  2. I live in the USA yet I feel like you wrote these tips for me. What an excellent resource of things to recall when buying rental property. Thanks for the posting of it.

  3. weenie says:

    Great post. I’d also add that people need to consider whether they’re more interesting in earning via their capital or their income. For capital, if you have the funds, probably invest in London where you’re more likely to make a decent profit when you sell up. For income, probably invest in say the north/north west, where the rental income yields are a lot higher but the houses are cheaper and prices not likely to rise so much.

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